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Savewith a NBCUniversal ProfileCreate your free profile or log in to save this articleSept. 27, 2025, 5:00 AM EDTBy Allan Smith, Sahil Kapur and Shannon PettypieceDemocrats were swept out of power last year as they suffered political pain from rising costs. Now, President Donald Trump is overseeing stubborn inflation, a slowing job market and anxiety over his tariffs, and Democrats are determined to make his party pay the price.With the 2026 midterm cycle on the horizon, the economy is shaping up to once again play a dominant role. Democrats are keenly aware that what sunk them last time could be their ticket back to power.Trump’s own daring promise is complicating the situation for his party after he told voters in 2024, “When I win, I will immediately bring prices down, starting on Day 1.”That’s a message Democrats will be emphasizing.“He’s promised us this golden age. It’s not happening,” said Rep. Don Beyer, D-Va., a member of the U.S. Congress Joint Economic Committee. “He promised the renewal of all his manufacturing jobs — not happening. Promised tariffs could restore all this stuff — not happening at all.”Economic anxiety is high. The August jobs report showed only 22,000 new jobs — a paltry total compared to recent years. Prices on a variety of goods and services rose more than expected in August, with year-over-year inflation growing to 2.9%, the highest rate since January.The cost of household staples like coffee and beef are soaring even as the rise in food prices has slowed from the decades-high inflation seen in 2022. Overall, grocery prices were up 2.7% in August compared to a year earlier, the biggest increase in two years. Electricity costs are rising, too, driven in part by the growth of AI data centers. The August NBC News poll found that 45% of voters said rising costs are their top economic concern.Trump has sought to reshape much of the economy, with sweeping tariffs, large tax cuts and pressure on the Federal Reserve and private companies. That formula has coincided with some bright spots Trump and his allies have promoted: The stock market has seen substantial gains, in part because of the AI boom that Trump’s administration has sought to bolster. U.S. gross domestic product grew at a 3.8% annual pace between April and June after shrinking earlier this year, the Department of Commerce said in its second upward revision on Thursday.Yet his opponents say that the president is now trying to shift attention away from the topic. At a White House event on Monday about autism, Trump discouraged reporters from talking about the economy.“Let’s just make it on this subject,” Trump said, referring to the autism announcement. “I’d rather not talk about some nonsense on the economy. I will say this: The economy is unbelievable.”The headwinds have cut into what was long one of Trump’s advantages: Voters trusted him to strengthen the economy. It was a dynamic that helped boost his campaign with voters who were angry with price increases under President Joe Biden and wanted a return to Trump’s pre-Covid economy.Recent polls show voters have soured on Trump’s handling of the economy. A Fox News poll this month found that 52% of voters believe the administration has made the economy worse — the same number who said in January the Biden administration was doing so. Trump’s performance on cost of living was his worst issue, with 67% of voters disapproving. What’s more, 63% disapprove of his handling of tariffs, and 60% of his economic efforts.Now, Democrats are seeking to unify around an economic message they think can bring together their fractured party as they reel from a loss to Trump. But Republicans expressed confidence that once their “big, beautiful bill” starts to sink in, and as uncertainty around tariffs dies down, economic sentiment will turn in their favor.Michigan state Sen. Mallory McMorrow, a Democratic Senate candidate, said she’s hearing economic concerns “all over the state right now.”“I’m hearing this most acutely with young people, people who might have recently graduated from college, have degrees, who just cannot find a job right now, and [are] certainly feeling the tightening economy, but also the impacts of AI,” McMorrow said, adding that she is telling people: “This is not a global pandemic that we’re in right now. This is also not a recession like we saw in 2007-09. The inflation that we are seeing right now is entirely man-made, and it’s caused by Donald Trump.”’Waiting and seeing’There are other potential problems for Republicans.Consumer spending is holding steady but being driven by the top 10% of earners. Young men — a population that played a huge role in Trump’s victory — have been hit hard in the slowing job market. Labor Department data showed initial jobless claims for the week ending Sept. 6 jumped by 263,000 — the most since October 2021 — though initial jobless claims fell to 218,000 for the week ending Sept. 20.Americans’ view of capitalism is falling too. A Gallup survey this month showed 54% of Americans hold a positive view of the economic system, the lowest level the poll has recorded.“There is a big cohort of people who voted for Donald Trump because they really, sincerely believed that he was going to bring down the price of their daily necessities,” Sen. Brian Schatz, D-Hawaii, said. “And almost everything is significantly more expensive.”Sen. Cynthia Lummis, R-Wyo., said it’s too early to grade Republicans’ performance on lowering costs because “the economy doesn’t move on a dime.” But she acknowledged that they need to make tangible progress by the 2026 midterms.“The problem right now is the people who are doing well, the people who are consuming the most, are the very wealthy,” Lummis said. “It is the middle class and lower middle class that is not buying because their salaries aren’t keeping up with inflation or interest rates are too high to buy a home. They’re treading water, and so we have to focus on the middle class in order to alleviate concerns about a bad outcome in the 2026 elections.”The White House argued that the economy is in better shape than other measures indicate, pointing to wage increases, a lower rate of inflation than in Biden’s term, a job market they say favors native-born workers, and surging stocks, among other measures.“Joe Biden’s reckless policies destroyed the economy, but President Trump is fixing it in record time to usher in the Golden Age of America — inflation has cooled, wages are on the rise, real consumer spending rose in July, manufacturing jobs are being reshored, and over half a million good-paying jobs have been created in the private sector,” White House spokesperson Taylor Rogers said, adding that Americans “will continue to feel economic relief in the months ahead as … massive tax cuts, deregulation, and energy dominance continue to materialize.”The White House has also highlighted a major revision this month from the Bureau of Labor Statistics showing job growth was much slower than originally reported between April 2024 and March 2025, saying it shows slower job growth dates back to Biden. Trump fired the head of the BLS — and nominated a MAGA ally in her place — after a particularly weak July jobs report.There has been a steep decline in the immigrant workforce under Trump’s aggressive deportation agenda. Vice President JD Vance and other conservatives have said the exodus of foreign-born workers can explain the weaker job growth, but that it creates more employment opportunities for native-born Americans. The Economic Policy Institute, a left-leaning think tank, argued Trump’s job market has been worse for U.S.-born workers, pointing to BLS data showing an increased unemployment rate among this group.Jared Bernstein, chair of the Council of Economic Advisers under Biden, said he sees the economy “slowing in ways that are concerning” and warned of the potential for stagflation.“Employers and businesses are in a bit of a hiring freeze and investment freeze,” Bernstein said. “They’re sitting on their hands, waiting and seeing what’s going to come of the trade war, the deportations, the chaos, the Federal Reserve badgering, the DOGE cuts. It’s all unsettling for businesses who like a much calmer environment as a backdrop.”Fed cuts interest rates citing “risks” to jobs market01:44In a move Trump long pushed for, the Federal Reserve last week cut interest rates by 0.2 percentage points. In his news conference after lowering interest rates, Fed Chair Jerome Powell tied the cut directly to issues in the labor market.“You see people who are sort of more at the margins, and younger people, minorities are having a hard time finding jobs,” Powell said.He added that the economy is being bolstered by “unusually large amounts of economic activity through the AI build-out and corporate investment.” And he said that while consumer spending numbers exceeded expectations, they appear skewed toward high earners.“So it’s not a bad economy or anything like that,” Powell said, adding: “But from a policy standpoint … of what we’re trying to accomplish, it’s challenging to know what to do.”Trump’s tariffsMuch of the existing economic uncertainty has centered on the president’s tariff agenda. The dust appears to be more settled now: Some tariffs have been lowered, new trade agreements have been reached with key partners, and a number of categories, including some electronics, have been exempted.A White House official said uncertainty on passage of the “big, beautiful bill” and on tariffs has “largely been resolved.”“You can now plan around what the tariff rate is going to be,” this person said. “We’re not in flux anymore.”So far, Trump’s vow to bring manufacturing jobs back to the U.S. has yet to materialize, with industry continuing to cut back on the number of workers. The U.S. lost 12,000 manufacturing jobs in August amid a wider slowdown in the labor market, according to BLS data. The Trump administration has pointed to manufacturing investments, noting factories can’t open overnight.Trump’s tariffs have weighed on manufacturing companies now having to pay tariffs on steel and aluminum imports, along with imported machinery and parts. Companies have also continued to ramp up automation, requiring fewer workers to make the same amount of goods.Federal Reserve data released Sept. 16 showed a mixed picture for the manufacturing sector last month, with factory production ticking up in August after declining in July. The increase was driven by a rebound in auto production while other areas, like companies making machinery and metal products, saw declines.Steve Moore, a senior economic adviser to Trump in his first term, believes the economy is in a good spot, pointing to similar data points as the White House. But he cautioned that “at some point, some of these [tariff] costs are going to be passed down to consumers, no question about it,” though he said the country could still see benefits down the road.There is an economic uncertainty that has the president and his allies concerned: a case before the Supreme Court that could lead to his tariffs being overturned. Moore said the White House is “very keyed into” the case.“I think it’s going to be disruptive,” Moore said if the court overturns the tariffs. “And I don’t think anybody really knows what would happen. Will they have to return the money to the people who paid that? Will they pay the taxes? And what happens to trade deals? It would be havoc.”’You can’t fool people on the economy’Democrats want to frame a straightforward economic argument for the midterm elections: Trump promised to lower prices immediately upon taking office, and yet costs are rising.“What we must do is not just compare this economy to Biden’s,” Beyer said, “but compare it to what Trump said he was going to do.”In a memo marking Trump’s first six months in office, the Democratic National Committee mentioned lowering prices as the top promise Trump had broken upon taking office. A memo this month from the Bipartisan Cost Coalition, an anti-Trump group launched by former aides to Biden and President George W. Bush, said 2026 candidates “can succeed in this environment by having the courage to challenge Trump’s dishonest narratives and draw a line between chaos and the rising cost of living.”Sen. Mike Rounds, R-S.D., said GOP prospects in 2026 will turn on whether they can sell Trump’s “big, beautiful bill” and improve voters’ confidence in their finances.Republicans are eager to promote the bill’s new tax cuts and credits, including tax breaks on overtime and tipped wages as well as expensing and deduction provisions they believe will encourage new investment in the U.S. and grow the job market.“It’s going to depend on whether or not we can actually see the benefits and get the information on the benefits out about what the reconciliation package did,” Rounds said.So far, Trump himself has not taken to the trail to promote the landmark legislation, though Vice President JD Vance has been visiting key battlegrounds to do so.The legislation’s cuts to health insurance programs already threaten hundreds of thousands of jobs. This month, a hospital chain in Virginia announced a consolidation it said is in part necessitated by “the One Big Beautiful Bill Act and the resulting realities for healthcare delivery.”A Republican operative working on Senate races said Trump’s legislative package will give business leaders certainty on taxes over the next few years. But this person was mindful of how the job market looks now, particularly for younger voters struggling to find entry-level jobs.“Trump realizes that you really need to gas this thing up to get people hiring and get confidence in the market,” this person said. “So it’s not an overnight switch that the president could flip to get people hiring young men into the economy.”A Washington Post-Ipsos poll conducted this month found that while just 40% of voters approved of Trump’s handling of the economy, Republicans still held a 7-point edge over Democrats on which party voters trust more on the issue.Pennsylvania’s new Democratic Party Chairman Eugene DePasquale said he wants to get Keystone State Democrats to “focus like a laser” on economic issues.“But it’s one thing to have people be upset about Trump,” DePasquale said. “It’s another thing for them to vote for us. … We’ve also got to show we’re listening and putting real ideas on the table to try to win him back.”Moore said Republicans will need “to remind people of how bad things were under Biden” while framing the president’s signature legislation not as a tax cut but as a job creation bill.“Look, you can’t fool people on the economy,” Moore said. “People know what’s going on. They know what it costs to buy groceries. They know what jobs are available. When Biden was saying, ‘Oh, [inflation is] transitory,’ and so on, it didn’t fool people. So these policies have to be shown to be working.”Allan SmithAllan Smith is a political reporter for NBC News.Sahil KapurSahil Kapur is a senior national political reporter for NBC News.Shannon PettypieceShannon Pettypiece is senior policy reporter for NBC News.

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Democrats were swept out of power last year as they suffered political pain from rising costs.

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